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06 Revenue and Other Income
This quiz is about revenue recognition principles in accounting. It covers topics such as adjusting entries for income received in advance, recognizing revenue for services provided, preparing closing entries, and understanding the impact of various transactions on financial statements related to revenue recognition.
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In applying the revenue recognition principle to a given transaction, the most important moment or period in time is when the
A) related cash inflows occur.
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Add RecommendationAdd TagsView All Assigned TagsB) related expenses are incurred
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Add RecommendationAdd TagsView All Assigned TagsC) related sales transaction is completed
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Add RecommendationAdd TagsView All Assigned TagsD) related customer is billed.
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If a company fails to adjust an income received in advance account for rent at the beginning of the month that has been earned and recognised, what effect will this have on that month’s financial statements?
A) Assets will be understated and revenues will be understated.
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Add RecommendationAdd TagsView All Assigned TagsB) Liabilities will be understated and revenues will be understated.
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Add RecommendationAdd TagsView All Assigned TagsC) Liabilities will be overstated and revenues will be understated.
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Add RecommendationAdd TagsView All Assigned TagsD) Assets will be overstated and revenues will be understated.
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A) Liability will be overstated
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Add RecommendationAdd TagsView All Assigned TagsB) Asset will be overstated
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Add RecommendationAdd TagsView All Assigned TagsC) Profit will be overstated
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Add RecommendationAdd TagsView All Assigned TagsD) Profit will be understated
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A) Recognition of rent as earned instead of rent received in advance from customers
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Add RecommendationAdd TagsView All Assigned TagsB) Recognition of interest income from trade receivable for late payment
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Add RecommendationAdd TagsView All Assigned TagsC) Recognition of services that had been provided to customers but the cash has not yet been received
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Add RecommendationAdd TagsView All Assigned TagsD) None of the above
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A) Each revenue account will be debited
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Add RecommendationAdd TagsView All Assigned TagsB) Each revenue account will be credited
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Add RecommendationAdd TagsView All Assigned TagsC) An income summary account will be debited
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Add RecommendationAdd TagsView All Assigned TagsD) The income summary account will be transferred to the capital account
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Amelia rented premises to a tenant. At the end of Amelia’s financial year the tenant had paid 2 months’ rent in advance. Which adjusting entries would Amelia make in her financial statements?
A) Dr Rent expense payable; Cr Rent expense
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Add RecommendationAdd TagsView All Assigned TagsB) Dr Cash at bank; Cr Rent income
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Add RecommendationAdd TagsView All Assigned TagsC) Dr Cash at bank; Cr Rent received in advance
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Add RecommendationAdd TagsView All Assigned TagsD) Dr Rent income; Cr Rent received in advance
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What was Jun Da’s total income for January 2024 from his hair salon considering he provided hair styling services to 30 customers at $10 each with 2 customers not paying on January 31st?
A) $280
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Add RecommendationAdd TagsView All Assigned TagsB) $300
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Add RecommendationAdd TagsView All Assigned TagsC) $320
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Add RecommendationAdd TagsView All Assigned TagsD) None of the above.
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Mary has performed $5000 worth of coaching services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Mary make?
A) Debit Cash at bank; Credit Income received in advance
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Add RecommendationAdd TagsView All Assigned TagsB) Debit Trade Receivable; Credit Income received in advance
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Add RecommendationAdd TagsView All Assigned TagsC) Debit Trade Receivable; Credit Service Revenue
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Add RecommendationAdd TagsView All Assigned TagsD) Debit Income received in advance; Credit Service Revenue
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On 1 January 2024 a $14 000 cheque was received for services to be provided over the next 14 months. The amount was recorded as revenue. How much revenue should be recognized for the year ended 31 December 2024?
A) $1000
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Add RecommendationAdd TagsView All Assigned TagsB) $2 000
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Add RecommendationAdd TagsView All Assigned TagsC) $12 000
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Add RecommendationAdd TagsView All Assigned TagsD) $14 000
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On 1 November 2021, five months of subscription revenue amounting to $12 500 were received for the period from 1 November 2021 to 31 March 2022. How much was the subscription revenue recognized for the year ended 31 December 2021 if there was no balance in the subscription revenue account?
A) $2 500
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Add RecommendationAdd TagsView All Assigned TagsB) $5 000
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Add RecommendationAdd TagsView All Assigned TagsC) $7 500
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Add RecommendationAdd TagsView All Assigned TagsD) $12 500
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The financial year of Sunset Paradise is from 1 April to 31 March. On 1 June 2021, a cheque of $33 000 was received from a customer for 11 months’ service from 1 June 2021 to 30 April 2022. What is the amount of income adjustment for statement of financial position as at 31 March 2022?
A) $3 000 income received in advance
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Add RecommendationAdd TagsView All Assigned TagsB) $3 000 revenue receivable
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Add RecommendationAdd TagsView All Assigned TagsC) $6 000 income received in advance
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Add RecommendationAdd TagsView All Assigned TagsD) $6 000 revenue receivable
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On 1 June 2024 Allnut Landscaping Service received $1 800 in advance for an agreement to provide service to a client for three months starting that day. As of 30 June 2024 Allnut:
A) would have a $600 liability to its client under revenue recognition theory
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Add RecommendationAdd TagsView All Assigned TagsB) would have recognized $1200 revenue under revenue recognition theory
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Add RecommendationAdd TagsView All Assigned TagsC) would have a $1200 liability to its client under revenue recognition theory
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Add RecommendationAdd TagsView All Assigned TagsD) would have recognized $1800 revenue under revenue recognition theory
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Mason Company always collects rent in advance from its customers. The 2021 income statement for Mason reports rent revenue of $18 000. The related balance sheet accounts for the beginning and end of the year were:
Based on this information the amount of cash collected during 2021 from Mason’s customers was:
A) $28 250
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Add RecommendationAdd TagsView All Assigned TagsB) $26 500
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Add RecommendationAdd TagsView All Assigned TagsC) $20 750
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Add RecommendationAdd TagsView All Assigned TagsD) $7 750
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Vivid Visions offers art classes for children. The following information was obtained from the records of Vivid Visions for the financial year ended 30 April 2024:
Vivid Visions received a total of $25 000 in cash for art class revenue for the year ending 30 April 2024. Which of the following journal entries is related to art class revenue earned for the financial year ending 30 April 2024 in the books of Vivid Visions?
A) Debit Cash in hand $25 400; Credit Art Class Revenue $25 400
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Add RecommendationAdd TagsView All Assigned TagsB) Debit Art Class Revenue received in advance $1 200; Credit Art Class Revenue $1 200
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Add RecommendationAdd TagsView All Assigned TagsC) Debit Art Class Revenue $25 400; Credit Income Summary $25 400
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Add RecommendationAdd TagsView All Assigned TagsD) Debit Cash in hand $20 000; Credit Art Class Revenue $20 000
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Unfortunately, the student did not perform well on the quiz about revenue recognition principles in accounting. They may need to review the topics covered in the quiz to strengthen their understanding.
Don’t be discouraged by the result. Failure is a part of the learning process, and it provides an opportunity to identify areas that need improvement.
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Don’t be discouraged by the result. Failure is a part of the learning process, and it provides an opportunity to identify areas that need improvement.
Suggestions for Improvement:
– Consider revisiting the adjusting entries for income received in advance, recognizing revenue for services provided, and preparing closing entries.
– Practice more questions related to revenue recognition principles to enhance your comprehension.
– Practice more questions related to revenue recognition principles to enhance your comprehension.
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